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01/Jul/2024 – About AGM of JAPAN PURE CHEMICAL CO., LTD.

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Hibiki Path Advisors (hereinafter referred to as “Hibiki” or “we”) made shareholder proposals for Item No.3 (Partial Amendment to Articles of Incorporation (Decision-Making Body for Determination of Surplus Distribution, etc.) and Item No.4 (Shares Buy-Back) at the 53rd Annual General Meeting of Shareholders of JAPAN PURE CHEMICAL CO., LTD. (hereinafter referred to as “JPC”) held on June 25, 2024.

According to the AGM Report submitted by JPC on June 28, approximately 40% of the shareholders supported Hibiki proposed Item No.3. We sincerely appreciate the many shareholders who supported our proposal. Sadly, the proposal was turned down, and as a result, Item No.4, which was contingent upon the approval of Agenda Item No.3, was not put to a vote. However, seeing that about 40% of the shareholders supported our proposal, it would be interpreted as a strong message from the shareholders to the JPC Board of Directors.

If we exclude the approximately 15,000 votes belonging to shareholders who are related to JPC or have cross-shareholding relationships¹ (estimated from the top 30 shareholders listed in the summer 2024 issue of Toyo Keizai Inc’s Shikiho), Item No.3 received about 60% support from “non-related” general individual shareholders and institutional investors. This strongly demonstrates the general shareholders’ current sentiment, free from cross-shareholding influences, and we believe that the JPC Board of Directors should acknowledge this fact and use it to improve future corporate governance design.

The fact that more than half of the votes from general shareholders, including institutional investors not related to JPC, supported our shareholder proposal of Item No.3, is evidence that the capital market is critical of JPC management’s stance that decisions on dividends-related matters are not under the authority of the General Meeting of Shareholders.

Furthermore, the approval rate for the reappointment of President Kojima as a director at this General Meeting of Shareholders was 75.7%, a significant drop from last year’s 81.1%. Excluding the votes of company-related parties and shareholders with cross-shareholding relationships², the approval rate from general individual shareholders and institutional investors falls below 65%. It can be seen that a considerable number of shareholders outside the company are concerned about President Kojima’s management skills. We have supported JPC for a long time, but we have strong concerns about the current state of the business and its management approach. We believe that the increase in critical votes against President Kojima is also due to the aforementioned support for Item No.3, indicating criticism of JPC management’s shareholder-neglecting stance of not deferring decisions on dividend-related matters to the General Meeting of Shareholders.

We strongly urge the JPC Board of Directors to acknowledge and accept the essential aspects of the results of this General Meeting of Shareholders, present a fundamental reform plan for the balance sheet (which is in an excess capital state), and dispose of policy-holding stocks, and to reset the mid-term management plan with quantitative targets such as ROE and practical effectiveness.

¹ It is assumed that company-related parties and policy-holding counterparties oppose the shareholder proposal.
² It is assumed that the company’s related parties and policy holders agree with the reappointment of Director Kojima.

For relevant posts on the company, please see the documents linked below.
16/Jun/2024 – ISS Recommends Support for Hibiki’s Shareholder Proposals
03/Jun/2024 – Shareholder Proposal Explanation Video about JAPAN PURE CHEMICAL CO.,
24/May/2024 – Shareholder Proposal for JAPAN PURE CHEMICAL CO., LTD.

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